Extensive Margins and the Demand for Money at Low Interest Rates

I am grateful to Abe, Fry, Min, Vongvipanond, and Yu (hereafter re¬ferred to as AFMVY) [1] for obliging me to reconsider my article [2] on the demand for money in Pakistan. Upon careful examination, I find that the AFMVY results are, in parts, misleading and that, on the whole, they add very little to those provided in my study. Nevertheless, the present exercise as well as the one by AFMVY is useful in that it furnishes us with an opportunity to view some of the fundamental problems involved in an empi¬rical analysis of the demand for money function in Pakistan. Based on their elaborate critique, AFMVY reformulate the two hypo¬theses—the substitution hypothesis and the complementarity hypothesis— underlying my study and provide us with some alternative estimates of the demand for money in Pakistan. Briefly their results, like those in my study, indicate that income and interest rates are important in deter¬mining the demand for money. However, unlike my results, they also suggest that the price variable is a highly significant determinant of the money demand function. Furthermore, while I found only a weak support for the complementarity between money demand and physical capital, the results obtained by AFMVY appear to yield a strong support for that rela¬tionship.1 The difference in results is only a natural consequence of alter¬native specifications of the theory and, therefore, I propose to devote most of this reply to the criticisms raised by AFMVY and the resulting reformulation of the two mypotheses.

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The Causes and Challenges of Low Interest Rates: Insights from Basic Principles and Recent Literature

SSRN Electronic Journal ◽

10.2139/ssrn.3628075 ◽

2020 ◽

Author(s):

Youchang Wu

Keyword(s):

Interest Rates ◽

Recent Literature ◽

Basic Principles ◽

Low Interest Rates

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Remaking Retirement

10.1093/oso/9780198867524.001.0001 ◽

2020 ◽

Keyword(s):

Interest Rates ◽

Older Workers ◽

Older Persons ◽

The United States ◽

Older Population ◽

The Past ◽

Cost Of Education ◽

The World ◽

Low Interest Rates ◽

Key Aspects

Around the world, people nearing and entering retirement are holding ever-greater levels of debt than in the past. This is not a benign situation, as many pre-retirees and retirees are stressed about their indebtedness. Moreover, this growth in debt among the older population may render retirees vulnerable to financial shocks, medical care bills, and changes in interest rates. Contributors to this volume explore key aspects of the rise in debt across older cohorts, drill down into the types of debt and reasons for debt incurred by the older population, and review policies to remedy some of the financial problems facing older persons, in the United States and elsewhere. The authors explore which groups are most affected by debt, and they also identify the factors causing this important increase in leverage at older ages. It is clear that the economic and market environments are influential when it comes to saving and debt. Access to easy borrowing, low interest rates, and the rising cost of education have had important impacts on how much people borrow, and how much debt they carry at older ages. In this environment, the capacity to manage debt is ever more important as older workers lack the opportunity to recover for mistakes.

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Special Issue “Interplay between Financial and Actuarial Mathematics”

Risks ◽

10.3390/risks9080139 ◽

2021 ◽

Vol 9 (8) ◽

pp. 139

Author(s):

Corina Constantinescu ◽

Julia Eisenberg

Keyword(s):

Machine Learning ◽

Control Theory ◽

Option Pricing ◽

Interest Rates ◽

Financial Mathematics ◽

Special Issue ◽

Actuarial Mathematics ◽

Mortality Models ◽

Low Interest Rates

The Special Issue aims to highlight the interaction between actuarial and financial mathematics, which, due to the recent low interest rates and implications of COVID-19, requires an interlace between actuarial and financial methods, along with control theory, machine learning, mortality models, option pricing, hedging, unit-linked contracts and drawdown analysis, among others [...]

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Low Interest Rates and Risk Incentives for Banks with Market Power

Journal of Monetary Economics ◽

10.1016/j.jmoneco.2021.04.006 ◽

2021 ◽

Author(s):

Toni M. Whited ◽

Yufeng Wu ◽

Kairong Xiao

Keyword(s):

Interest Rates ◽

Market Power ◽

Low Interest Rates

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Counter-cyclical public venture capital: Debt-funding as an anti-austerity innovation strategy

Social Science Information ◽

10.1177/0539018417719795 ◽

2017 ◽

Vol 56 (3) ◽

pp. 477-495 ◽

Cited By ~ 2

Author(s):

Alex Etzkowitz ◽

Henry Etzkowitz

Keyword(s):

Venture Capital ◽

Interest Rates ◽

Innovation Strategy ◽

Productive Capacity ◽

Knowledge Based ◽

Low Interest Rates ◽

The Usa ◽

The Business Cycle ◽

Smart Specialization ◽

Private Venture

This article outlines a counter-cyclical innovation strategy to achieve prosperity, derived from an innovative project, the California Institute for Regenerative Medicine (CIRM). We identify an ‘innovation paradox’ in that the very point in the business cycle, when legislators are tempted to view austerity as a cure for economic downturns and to reduce innovation spend, is when an increase is most needed to create new industries and jobs and innovate out of recession or depression. It is both desirable and possible that policymakers resist the urge to capitulate to the innovation paradox. During periods that exhibit subdued inflation, elevated spare productive capacity, and low government borrowing rates, governments should increase their borrowings and use the proceeds to boost investment targeted towards innovation. We show how the State of California successfully utilized debt financing, traditionally reserved for physical infrastructure projects, to stimulate the development of intellectual infrastructure. Finally, we recommend a halt to European austerity policies and a ‘triple helix’ broadening of narrow ‘smart specialization’ policies that chase a private venture capital chimera. Europe should seize the present macroeconomic opportunity of low interest rates, borrow for innovation and be paid back manifold by ‘picking winners’, similarly to what the USA has been doing through DARPA (Defense Advanced Research Projects Agency) with GPS, as a response to Sputnik, the Internet and artificial intelligence, or the driverless car, formerly known as the ‘autonomous land vehicle’ in its military guise. Proactively targeted macroscopic investments in innovation are needed to solve the productivity/employment puzzle and foster the transition to a knowledge-based society.

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